Major AML amendments take effect in Hong Kong
The SFC held a consultation on its plans in September 2020 and the resulting draft proposals were published on 15 September 2021. The guidelines are gazetted and come into effect today (30 September). The FATF report addressed some areas where licensed corporations, especially smaller ones, could improve, particularly regarding certain high-risk customers such as foreign politically exposed persons, non-resident customers and customers exposed to sanctions. It requested improvements to Hong Kong's rules on institutional and customer risk assessments, as well as risk mitigation for cross-border correspondent relationships, suspicious transactions and third-party deposits and payments. It also offered further guidance on persons purporting to act on behalf of the customer, as well as establishing sources of funds and wealth.
Under the guidelines, the risk-based streamlined approach to verifying the identity of certain persons has been reinstated. Where the business relationship presents a low money laundering and terrorist financing risk, it is acceptable to rely on a confirmation letter from a department independent of the persons purporting to act on behalf of the customers, such as the compliance, audit or human resources departments.
Firms that permit third-party deposits and payments must establish and maintain adequate policies and procedures. Delayed due-diligence on the source of a third-party deposit is allowed only when there is no suspicion of money laundering or terrorist financing.
Licensed firms will still need to review their institutional risk assessment at least once every two years, but simpler approaches can be taken where the range of products and services offered by the firm is very limited or its customers have a homogeneous risk profile.
Managers in charge of AML can take on more responsibilities, acting as an AML compliance officer and overseeing third-party deposits and payments.
While these guidelines take immediate effect, an important change relating to new due-diligence procedures in cross-border correspondent relationships has been postponed for a further six months.
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